Don't Let Ciena's Stock Fool You
Just because the shares have had some legs, it doesn't mean the run will continue.
But all things considered, the Maryland-based company simply doesn't scratch me where I itch, and so I won't be nibbling ahead of its fourth-quarter numbers (which are due out in the early part of December).
Here's my latest take on the situation:
1. Ciena's stock has done well this year, which has left its shareholders smiling and confounded many of the pessimists, including myself. In other words, I've been wrong so far. But just because the shares have had some legs as of late doesn't mean the run will continue. My sense is that the investment community will eventually pinch itself and realize that the company is expected to put up a dime a share next year in 2010, which isn't too spiffy given the shares trading in the lower double digits. Even if it put up $0.50 I'd still have some serious pause.
2. The company has missed expectations in the last three of four quarters, which doesn't give it a lot of Street cred, or give me confidence that it's about to embark on some sort of beat streak.
3. Analysts are expecting the company to lose $0.06 in its fourth quarter. Will Ciena meet or beat that number? Given its record this past year, I don't have a lot of faith. But even if it edges out the number, so what? There are plenty of other names in tech out there knocking out estimates that appear to be much better values from a price-to-expected-earnings standpoint.
4. I'd rather punch Cisco's (CSCO) ticket. It's expected to be well in the black this year and next year, too, and it trades at right around 16.3 times this year's estimate, which is $1.43. Not too bad, in my opinion. It's also beaten estimates four quarters straight, which is a pretty good record -- at least compared with Ciena.
5. I don't want to rain on Ciena's parade, but if I were long, I'd probably use this as a time to bail rather than add to my position. I just don't see a tremendous amount of value there, and there are better opportunities.
Hey, have a great day!
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter